European streaming music service Spotify has developed an application to use their service on the popular iPhone, but it must first submit it for approval to iPhone maker Apple, which could reject it on grounds that Spotify competes with its own iTunes music store.

Apple has approved applications from streaming music providers Pandora and Last.fm and satellite broadcaster Sirius XM, but those services are more like streaming radio, with Pandora and Last.fm allowing people to listen to a specific genre of music or music similar to listeners favourite artist. Spotify allows people to choose specific songs to listen to and create playlists of those songs.

Speaking to paidContent, Spotify CEO Daniel Ek said he expects Apple to approve the application in the next few weeks, and he added, "Apple has already approved several other music services such as Last.fm, Deezer and Pandora. We very much look forward to people being able to access their Spotify library wherever they might be and we've spent significant time and resources to ensure we've stuck to Apple's developer guidelines point by point."

Apple might be more open to approving Spotify's application because it is in talks with music companies and could be bringing out its own streaming music service, although such a service has been rumoured for years. Apple and the music industry might be trying to increase revenues from digital music by offering value-added bundles of content including video, interviews and streamed music.

Spotify has two services: a free service supported by advertising; and a premium service that allows users to listen to ad-free streams for £9.99 a month.

The iPhone application will be restricted to Spotify's premium users. Some iPhone applications such as voice over internet service Skype are restricted to only working on Wi-Fi, but the Spotify application will work over Wi-Fi and also 3G mobile phone data networks.

One of the biggest draws for Spotify's application will be the ability to listen to one's favourite music even when no internet connection is available.

With advertising supported businesses coming under pressure during the recession, Spotify must convert more users from the free model to its premium model to succeed where others have failed, says Mark Mulligan, vice president and research director of consumer product strategy at Forrester Research.

The problem is that the premium streaming music businesses have a dismal record of failure in the UK, he said. Virgin and HMV shuttered their premium music streaming businesses, with HMV relaunching a new offering. Napster has between 50,000 and 60,000 UK subscribers, numbers so modest that it shifted its European headquarters to Germany.

Although Spotify has not discussed publicly how many premium subscribers it has, Mulligan estimates that the figure is in line with the industry standard 1% of its user base. "You have to really detest ads to pay £9.99 a month not to get them," he said.

To survive and add more paying customers, companies like Spotify must launch value added-services like this mobile application.

Spotify is currently not available in the US, and the application will likewise only be available in the west European and Scandinavian markets where Spotify operates. However, this could be an important step towards a US launch.

On Spotify's blog post announcing the availability of the application, many users are asking when it will be available for other major mobile phone platforms including Nokia handsets running its S60 smart phone operating system and handsets running Google's Android OS. The company has already showed off a demo of the application running on Android earlier this summer.

The question remains whether Apple approve Spotify's application. Adding the caveat that one should never try to second guess Apple, Mulligan said he would not be surprised if the application was rejected.

While Spotify have been quite clever in releasing a video demonstration of the app to whet customers' appetite, Mulligan said it might be too good, too similar to Apple's own iTunes store experience to win approval.

In the wake of Apple's rejection of the Google Voice app for the iPhone - and with Spotify's application hanging in the balance - there's now a blog where would-be developers can go and look up what sort of things arouse Apple's ire